With geopolitical tensions tragically becoming the new standard, this framework opens the door for gold stocks to buy. Thanks to the underlying asset’s reputation as a universal store of wealth, gold offers a hedge against inflation and uncertainty. Still, why not just buy the physical metal outright?
To be sure, that’s what many people are doing. Indeed, an op-ed on CBS News urges the case for investing in precious metals. However, many inconveniences arise from the physical approach. Number one, bullion bars and coins are heavy, especially if you’re going to buy bricks. On a related note, precious metals are difficult to secure. Sure, you can store them away from your home but that costs money.
To sidestep these and other issues related to physical ownership, modern investors – particularly those not really interested in the prepper lifestyle – choose to target compelling gold stocks to buy. Yes, one key disadvantage is that this segment doesn’t neatly correspond with the spot market. As well, you’re dealing with business enterprises, which can fail for reasons non-gold related.
Nevertheless, the world is increasingly becoming a scary place due to rising tensions and military flashpoints. Subsequently, gold stocks make plenty of sense.
BHP Group (BHP)
While metals and mining giant BHP Group (NYSE:BHP) might not be a pure-play example of gold stocks, it’s nevertheless worth your consideration. Along with its gold projects, the company extracts other vital resources, including nickel, copper and coal. In addition, its Olympic Dam mine features uranium, which despite controversies will likely be a valuable energy resource due to the expanding global population.
On a financial note, BHP doesn’t quite offer an attractive deal. In terms of its forward earnings multiple, BHP runs just a tad worse than average. As for its three-year revenue growth rate of 12.4%, it’s just a bit better than the metals and mining industry’s median value. However, what I do appreciate is the bottom line. Specifically, BHP sports a net margin of 24%, beating out 88.53% of sector rivals.
Also, the company offers a forward yield of 5.41%. And the payout ratio of 60.23%, while elevated, isn’t too bad considering the high dividend. Analysts rate shares a moderate buy with a $60.50 price target.
Shifting toward the more traditional ideas for gold stocks to buy, Newmont (NYSE:NEM) is the world’s largest gold mining corporation. Per its public profile, the company also mines copper, silver, zinc and lead. All of these resources are vital and should find great utility for innovations of tomorrow. Still, as a major player, investors shouldn’t expect to get rich off of NEM.
Nevertheless, robust returns may be on tap for speculators. Since the start of the year, NEM has struggled conspicuously. Recently, the company released its earnings report for the third quarter. Against a per-share profitability target of 40 cents, Newmont delivered earnings per share of 36 cents. However, shares appear to have hit a bottom in early October.
Given the rumblings in the geopolitical realm, it’s possible that investors are responding to the events. Noticeably, NEM’s rise largely coincides with gold’s recent rally. And unlike the metal itself, Newmont offers a forward yield of 4.1%. Analysts rate NEM as a moderate buy with a $49.10 price target.
Barrick Gold (GOLD)
Another significant player among gold stocks to buy, Barrick Gold (NYSE:GOLD) produces both gold and copper at 16 operating sites in 13 countries. Leveraging millions of troy ounces of proven and probably gold reserves, Barrick consistently ranks among the favorites in this ecosystem. To be fair, since the beginning of the year, shares slipped modestly. However, by year’s end, we could be looking at a different story.
As with gold giant Newmont, Barrick shares appear to have hit a bottom early last month. Arguably more so than NEM, GOLD stock has corresponded much more closely to the underlying asset during its recent rally. Again, the geopolitical flashpoints – particularly with the Hamas attack against Israel and Russia’s invasion of Ukraine – provide a cynical narrative for well-established gold stocks.
And unlike its peer, Barrick posted EPS of 24 cents for its Q3 earnings report. In contrast, covering analysts anticipated only 19 cents. To pad the bullish thesis, the company offers a decent (though not great) forward yield of 2.43%.
Analysts rate GOLD stock as a strong buy with a $22.12 price target.
Wheaton Precious Metals (WPM)
One of the best gold stocks to buy if you’re looking for relative business stability, Wheaton Precious Metals (NYSE:WPM) is a streaming company. What that means is that Wheaton doesn’t directly extract valuable resources. Instead, it enters into agreements with mining enterprises to purchase a portion (or even all) of their metal production at a predetermined price.
Fundamentally, the advantage for Wheaton is superior predictability. While all mining-related enterprises present risks, the company signs contracts at pre-determined prices. Generally speaking, streaming entities tend to be more stable than their pure-play mining counterparts. At the same time, the upside potential may be limited due to this predictability.
Still, if you’re unsure about gold stocks and desire a more conservative approach, WPM could be an ideal choice. So far this year, it has performed decently well. In addition, WPM has picked up near-term mobility thanks to the underlying gold market’s rally.
Presently, analysts peg WPM a consensus moderate buy with a $56.03 average price target.
Royal Gold (RGLD)
Another idea among gold stocks to buy for those interested in the indirect approach, Royal Gold (NASDAQ:RGLD) offers streaming exposure. However, it also adds to the narrative a distinct twist. As its name suggests, the company also offers a royalty business model. Similar to Wheaton Precious Metals’ approach, Royal Gold enters into contracts with mining enterprises, inking specific terms.
However, rather than receiving physical metals for an agreed-upon price, royalty companies receive a fixed percentage of a mine’s revenue. Fundamentally, the advantages for Royal Gold are basically the same as resource streaming companies: business predictability. For investors unsure about betting heavily in the rare commodities space, an enterprise like Royal Gold offers an effective intermediary.
Again, that generally means upside rewards may be limited. Also, it’s worth pointing out that RGLD is so far underperforming WPM. However, Royal Gold gets the slightest of edge in terms of forward yield (1.35% versus 1.34%). Analysts rate RGLD a moderate buy with a $142.75 price target.
For the final two ideas for gold stocks, I’m going to enter the speculative side of the category. Primarily, you will want to exercise your discretion, though the upside potential may be quite robust if the stars align. First, DRDGOLD (NYSE:DRD) is a South African gold producer. It also specializes in metal recovery from the retreatment of surface tailings.
Thanks to this distinct offering, DRD has outperformed many other gold stocks, even accounting for its choppy nature. Over the past one-month period, shares have really been on the move thanks to renewed (arguably cynical) interest in gold. Further, it’s not out of the realm of possibility that the positive trend may continue.
Currently, DRD trades at a trailing earnings multiple of 12.3x, lower than 62.12% of rivals. Also, its price/earnings-to-growth (PEG) ratio sits at 0.36x, well below the sector median of 1.04x. In addition, H.C. Wainwright’s Heiko Ihle pegs DRD a buy with a $17 price target, implying significant growth.
NovaGold Resources (NG)
Headquartered in Vancouver, British Columbia, Canada, NovaGold Resources (NYSEAMERICAN:NG) is pursuing the development of the Donlin Gold mine in Alaska. Per the company’s website, the Donlin Gold project represents a large, high-grade deposit. Therefore, it adds tremendous exploration potential for NovaGold. Nevertheless, the key word here is potential. The reality of the business is that exploration firms aren’t guaranteed a pathway to production.
Now, I’m not just saying that to present a pessimistic picture. Rather, NG has lost a significant amount of market value since the beginning of the year. Yes, it has swung higher in the trailing month due to the strength of the underlying gold market. Still, anything can happen with metals exploration companies. Thus, the volatility in NG isn’t all that surprising.
Looking at NovaGold’s financials, it leaves much room for improvement. For example, it runs negative values for free cash flow and book growth rates. But if you believe in the gold market, NG could be interesting. Finally, analysts rate shares a moderate buy with a $9.39 price target, projecting massive upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.